Getting an Edge in F&I: Consumer Credit Reports

In today’s automotive retailing market, consumers are armed with information as never before. It’s never been so valuable to consumers or so easily obtained. 88 percent of car buyers conduct research online before coming into the dealership, looking at everything from safety ratings and vehicle prices to reviews of nearby dealerships.

In an age where the democratization of information has made everyone a savvy shopper, are you leveraging the information available to you?

Perhaps more than any other department in your dealership, the F&I office can benefit from information; specifically, the information made available by the three national credit bureaus.

It’s not unusual for dealers to miss taking full advantage of this resource, especially if they take a “one-and-done” approach. This mistake can cost you in two critical ways.

Differing Scores

As most dealers recognize, consumer credit reports from different sources will return differing scores, since the information available to each of the three national credit bureaus is not identical.

But, many in the industry may underestimate just how large a swing this difference can be. The average spread between the highest and lowest of all three credit bureau FICO scores for a consumer can be more than 38 points. That could mean a difference in credit tiers, or worse, not being able to finance the consumer at all.

With scores available from three different sources, dealers pulling just a single credit bureau report risk making financing decisions based on and incomplete picture of the consumer, which can be costly for the dealer and the consumer.

Consider a scenario: John Q. Public walks into your dealership and, because you only run one credit bureau report, you find he has a 562 credit score. None of your banks are willing to fund a consumer with such a low credit score, so you are forced to turn him away and lose his business.

Frustrated at this decision, John goes across town to your competitor, where they run all three of his credit bureau reports. They find one of his scores is a 600. This dealership has banks that are willing to fund a consumer with a 600 credit score, so they win his business.

Lender Preference

If your dealership partners with several different lenders, you know that they do not all favor information from the same credit bureau.

While some lenders may have no preference, others will request information from a specific bureau and base their financing decision on it. This can cost you the chance of getting a comprehensive picture of the customer’s credit, so picking the optimal lender is critical to landing each deal.

Picture a somewhat different scenario: Jane Doe walks into your dealership and you run only one consumer credit report – from the lender’s preferred bureau. You find she has a 720 credit score, which is good enough to get her financed at 5 percent APR and seal the deal. Unfortunately, she is unable to purchase any F&I products since the interest has cut into her budget.

This might seem good enough, but consider: What if she had a score of over 750 from another bureau? You could have funded at a lower buy rate, either increasing your reserve, or lowering her APR enough that, with the extra amount left in her budget, Jane could have also purchased F&I products.

Because lender preference prevented you from leveraging all the available information, you missed out on potential profit. It pays to make a habit out of working either with multiple lenders for every deal, or lenders who use credit reports from more than just one of the national credit bureaus.

Conclusion

Simply put, automotive deals using three credit bureau reports averaged lower APRs and higher finance reserves than deals using just a single credit bureau report. The average finance reserve for retail deals using three bureaus was over $80 more than their single bureau counterparts – far more than the cost of running additional bureau reports.

Leveraging all the information available to you in this digital age is critical to unlocking the full profit potential of your F&I department. Equip yourself to make better business decisions and turn that information into profit today.

About the Author

Anne Ravensbeck is a Product Planning manager for Sales and F&I applications at Reynolds and Reynolds.

Author: Contributing Writer

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